Whole Foods Market Struggles Amidst Increased Competition

Whole Foods Market (WFM) announced its 4Q15 and 2015 fiscal earnings on November 4, 2015 (year end September 27). According to a report by Market Realist, WFM had $15.3 billion in sales for the whole year, an 8.4% rise. However, at the end of this last quarter, they took a 56% hit in net profit, earning $56 million, compared to $128 million this quarter last year. The hit in net profit was due in part to increased operating expenses which grew 3% since 4Q14 to 32%.

Despite boasting high comparable store sales since 2010, for the first time in five years, same-store sales were –0.2% at the end of the quarter. This heavy decline in same-store sales, as well as net profit for WFM is primarily due to the intense competition it is facing in the organic food space from more traditional retailers such as Costco, Kroger and Walmart which have all heavily expanded their inventory of organic food. They also struggle with the image of being much more expensive than competitors.

Some WFM initiatives to improve future outcomes include, opening 38 new stores, selling over $2 billion in exclusive brands and close to $3 billion in prepared food/bakery as well as launching their first national brand campaign. With these and other initiative, WFM hopes to increase sales growth by 3-5%, square footage by 7%, improve EBITDA margins by 8.5% and earn a greater than 13.5% return on investment capital.

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